When is a lower exchange rate pass-through associated with greater exchange rate exposure?

Sources of time-varying exchange rate exposure

“…In order to illustrate why openness to trade and the industry composition of imports may matter for exchange rate exposure, we consider a stylized monopolistic-competition model based on Floden et al (2008). For a oligopoly version of the model, see Bodnar et al (2002).…”

“…Friberg and Nydahl (1999) have pointed out that limited exchange rate pass-through should give rise to a positive correlation between exchange rate exposure and a country's openness to trade. We set up a stylized model based on Floden et al (2008) to illustrate this argument. The model also illustrates the link between the industry composition of imports, exchange rate exposure, and exchange rate pass-through.…”

Is “Three” a lucky number? Exchange-rate exposure in a “Rule of Three” model

“…While this study is connected to the exposure literature, to our knowledge no other study examines exchange-rate exposure (exposure) and exchange-rate pass-through (pass-through) in an international triopoly. Marston (2001) and Floden et al (2008) emphasize the importance of market structure on the firms' pass-through and exposure. However, they study only duopolies, while we look at RoT markets.…”

Exchange-Rate Exposure in a 'Rule of Three' Model

“…They examine if the relation between exchange-rate exposure and passthrough as derived in their model is consistent with actual market behavior. Flode´n et al (2008) study how changes on the supply side across industries affects the relationship between passthrough and exposure. Since pricing affects profitability, they argue that nonlinearities in the cost function when studying the relationship between exchange-rate passthrough and exposure across industries are important.…”